Company Has To Be Proceeded Against By Giving An Opportunity To Be Heard Where It Has Also Been Accused, No Liability Only Qua Private Persons: Delhi HC

The Delhi High Court has observed that in a case where the Company has also been accused, the liability cannot be said to have been arisen only qua the private person and that the Company has to be proceeded against legally by giving it an opportunity to be heard.

Justice Chandra Dhari Singh added that the liability of a private person, in his capacity of a Director or any other authority to act on behalf of the Company, if has to be severed from the liability of the Company, cannot arise against him when the Company itself is also an accused.

"Such liability against the person would arise when the accused person has issued the cheque in his personal capacity which is distinguishable from his capacity as an employee or Director of a company. Where the Company has also been accused, the liability cannot be said to have been arisen only qua the private person and the Company has to be proceeded against legally by giving it an opportunity to be heard," the Court said.

The Court was dealing with a plea challenging the impugned order and judgment dated 13th September, 2017 passed by Additional Sessions Judge, Tis Hazari Courts, in a Criminal Revision Petition.

The petitioner had instituted a Complaint Case under sec. 138 of the Negotiable Instruments' Act, 1881 against the respondent before the Metropolitan Magistrate alleging that the respondent had taken a loan from the petitioner for a sum of Rs. 99,00,000 and for its repayment he submitted seven post-dated cheques amounting to Rs. 80,00,000, in pursuance of which the proceedings were initiated by petitioner against the respondent, since the cheque was dishonoured with the remarks "Insufficient Funds" when presented.

Summoning order was passed by the Metropolitan Magistrate vide order dated 11th July, 2016. Aggrieved by the summoning order, the respondent approached the ASJ invoking its revisional jurisdiction impugning the order. Vide order dated 13th September, 2019, the ASJ allowed the revision petition and set aside the order of summoning as well as the application under sec. 216 of the Cr.P.C. filed by the petitioner against the respondent for addition of charge under sec. 420, 468, 471 and 120B of the Indian Penal Code, 1860.

The petitioner was assailing the said Order of the ASJ dated 13th September, 2017.

The Court was of the view that the primary question to be decided in the matter was as to who was the drawer of the cheque in question.

The Court noted that although the cheque was the signed by the respondent, the cheque issued to the petitioner bore the name of the accused Company as the account holder, being a separate entity from its members, and not of the respondent.

"Moreover, as a requirement under Section 138 of the NI Act, the holder of the cheque that is dishonoured has to make a demand for the payment of the contested amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid," the Court said.

It was also of the view that it was an admitted fact that the cheque presented by the petitioner was returned dishonoured and the petitioner, as per the mandate of sec. 138 of the NI Act, issued a notice intimating the dishonour of cheque solely to the respondent and that it was only at the stage of complaint proceedings that the petitioner impleaded the accused company as a party.

"In the present case, the accused Company was made a party to the complaint case without being furnished a notice, thereby, without it an opportunity to defend itself. In such a situation, had the Company been held guilty of the offence under Section 138 of the NI Act, it would have been without giving it a fair an equitable opportunity of defending itself, since, the fact remains that it was never intimated about the dishonour of the cheque, as per requirement of the Act," the Court said.

It added that a perusal of the cheque also revealed that although it was signed by the respondent, it bore the name of the accused Company and not the respondent, hence, being a separate entity, the prime liability also pertained to the Company as the drawer of the cheque.

"Since, the drawer of the cheque was the accused Company, solely on the ground that the respondent had signed the cheque, a liability under Section 138 of the NI Act did not arise against him. The complaint was prima facie not maintainable against the Company as drawer of the cheque, the liability towards the respondent also did not arise keeping in view that respondent was acting on behalf of the Company and where the liability against the Company had been discharged, a private and severed liability against the respondent could not have arisen in the circumstances of the instant matter," the Court observed.

Accordingly, the Court upheld the impugned order and dismissed the plea.

Title: GEETA SINGH v. PRADEEP SINGH

Citation: 2022 LiveLaw (Del) 428

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